The city provides health insurance benefits to employees and
their family. The cost of coverage is
something that has become more and more of a problem from a budgetary
standpoint. Each year the costs for
providing service increases and as such the premium cost increases as
well. Premium costs are dictated by the
amount of benefit or coverage of the plan and the utilization rate of the group. With small groups the age of the employees is
also a factor. The older an individual
covered the higher the premium. This
later factor is offset in larger groups where coverage is at a set rate for
single coverage or for family coverage.
Some policies also have a single plus one rate.
The policies offered by the city provide good benefits. The city wanted to maintain this type of
coverage but was looking for a means to reduce the costs. Moving from a commercial policy to one
offered by a service cooperative was seen as a great way to manage costs and
was accomplished. At the time that
decision was made, the city council also capped the amount of benefit each
policy holder would receive. Any
increases in rates would be an employee expense.
There are 7 service cooperatives in the state. They bid insurance with the buying power of a
large aggregated group. Joining the
City County and Other Gov’t Agencies Cooperative gave the city the opportunity
to take advantage of group buying. By
being part of this larger group the age banding expense of health insurance
became a non-issue. This worked for a
couple of years with limited increases but our utilization rate was
increasing. Last year employees met to
discuss ways of lowering our costs. A
change in the policy reduced benefits slightly and required the employees to
pay a small premium cost. On the heels of that change, the utilization continued,
and with the new rating period the cost of service over premiums was at
1.19%. In other words for every dollar
of premium we were spending $1.19. This
results in a premium increase.
The employees met again to discuss ways of keeping the costs
in check. To lower costs the amount of
deductible needs to increase or we reduce the amount of final payout. With a higher deductible the employee would
need to spend more out-of-pocket before insurance covers the cost. With a reduction in payout the employee would
be expected to pay 20%, as an example, of the costs on each billing. Even with these types of changes it appeared
the employee share of premium costs would be significant.
Recognizing the large increase in costs the city council
agreed to increase the city participation in exchange for employees picking up
a larger deductible. The cap was raised
and employee’s deductible increased to $2250 for single and $4500 for a family
before insurance pays. With a larger deductible
the premium increase was reduced however it is also hoped with less insurance
payouts our utilization amounts will also decrease. The cost of health insurance coverage
continues to climb in general but with changes in benefit levels and other
means we hope to keep things in check.
